Friday, March 29, 2024

Scales holds its course

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Scales Corporation reported first-half results steady on the comparable period in 2019 despite an extraordinary six months when covid-19 impacted its apple picking and packing, plus its main selling season.
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Underlying net profit after tax to June 30 was $29.2 million versus $30m in 2019, declared as $27.8m after the NZ IFRS adjustments were made.

Underlying earnings before interest and tax were $44.4m compared with $47m.

The horticulture division (Mr Apple) grew a record-equalling crop of 5.1m tray carton equivalents (TCEs), including a record export volume of 3.9m TCEs with a pack out of 76%.

Year-to-date, 20% of the crop remains to be sold, managing director Andy Borland said.

Sales into China were impacted by covid-19 because their domestic harvest and sales programme was delayed by two months of lockdown, bringing their crop into conflict with our imports.

Borland does not expect a similar downwards effect on prices to repeat in 2021.

Earnings from horticulture were $32.4m compared with $41.3m last year.

NZ IAS 41 Agriculture requires unsold agricultural produce to be measured at fair value less costs to sell so, therefore, the first-half reported earnings reflect the anticipated full-year results.

The food ingredients division had a very strong first half, achieving $11m Ebitda compared with $5.12m last year and the FY2019 $13.5m.

Borland said the Shelby pet food business in the United States was trading very well and expanding its processing resources at one of seven locations, including a head office in Amarillo, Texas.

Cash-rich Scales is keen on expanding its businesses in the US but somewhat hampered by the inability to travel internationally and exercising caution around big commitments in uncertain times.

Pet care expenditure in that country is over US$70 billion annually.

Meateor and Shelby sales jumped 14% during the covid-19 outbreak from forward buying.

Meateor is a pet foods joint venture with Alliance Group in New Zealand.

Borland said he was confident that the RSE foreign worker scheme would operate normally over the next summer and autumn because the horticulture sector depended upon it and most workers came from Pacific Islands without covid.

“We demonstrated that we kept our people safe during peak-season operations in the level four lockdown,” he said.

The new $10m coolstore being built next to the existing Whakatu packhouse will be operational for the next harvest and improve centralisation of Mr Apple’s post-harvest operations.

Over 140ha of new plantings with branded apple varieties Dazzle and Posy have been made on two-dimensional structures which Borland said were innovative for the industry.

Those orchards should be more efficient to prune, thin and pick at maturity, from 2023 onwards.

Scales directors have maintained a dividend guidance of 19c/share but expect underlying full-year net profit to be towards the bottom of the previously advised $30m to $36m.

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